up and down, up and down, repeat

what has changed in personal finance?

Like many people, I watched in amazement on Tuesday night. I also spent some time listening to people’s reactions over the last couple of days, and I realized that I wanted to get a few things off my chest. A lot of people are expecting a lot of things – some negative, some positive. I don’t think it’s the time to think about what might be. Some basic lessons are still true:

You still have to spend less than you earn. Personal finance hasn’t changed since Tuesday. It won’t change on January 20th, either. The actions of the government have never mattered when it gets down to the basics: pay yourself first. Invest in yourself. Work smart, not just hard. Diversify your income streams. Don’t stop

People who sit around fretting about “socialism” or “socialized medicine” or “higher taxes” or anything like this are not the next generation of rich people. Investors and business builders and ambitious salaried people are still forging ahead, and will always adapt and overcome. Fortunes were made in the 40s when the top tax rate reached 95 percent. Fortunes were made at every point in American history, regardless of where the government was headed. I’m not saying smart planning isn’t valuable, but don’t start imagining the Russian Revolution of 1917. The time to start saving, investing and building wealth is now; don’t worry about what might or might not happen tomorrow, or a year from now.

This election proved once again that for all of us focus, discipline and vision are at the heart of success, NOT biography. For the fifth straight election, war veterans lost to men with lesser (or no) military credentials, and I would argue it had nothing to do with experience and everything to do with the fact that the winners focused on the future, not on the past (their biographies). This lesson hits me hard – and should hit anyone coasting on their laurels hard. A little background: I was rapidly promoted and given enormous responsibility early in my career because I was the guy willing to take the big clients, move overseas, and aggressively move up in the organization. Then I plateaued. I intentionally took a step back and coasted into contract consulting. I did it because of my kids, and I’m not sorry I did, but my point is simply that it takes enormous effort to continue to excel in your career. I would hope that even President-elect Obama’s opponents would realize that his dizzying rise to the presidency required, if nothing else, massive focus and discipline.

We are all alone. We are all interrelated. These two seemingly opposite statements are becoming more and more true every day. We are alone; increasingly working Americans are forced to provide their own education, retirement, health care and child care. You can argue whether this is a good thing or a bad thing – but the simple fact is that we are on our own more and more these days. At the same time we are more and more interrelated; the fate of our community or city or state or country weighs on us heavily as individuals. That $700 billion bailout is not going to be paid by “other people,” after all. If you aren’t worried about millions of Baby Boomers retiring with minimal savings, you should be – it’s going to impact all of us. We are all on our own, but our fates are all interrelated.

Nothing has changed in personal finance. Your goal has to be to live within your means, create wealth and once you have enough to support those close to you (friends, family, community) who need help. Nothing the government does or doesn’t do alters this basic mission. I won’t lie – I can’t see how our new president could be any worse than our current president, and honestly I think he’s going to be a lot – a LOT – better. But that’s just my opinion, and only the passage of time will tell. In the meantime, I’m going to keep saving, investing and diversifying my wealthstreams. I’m not waiting for anything to change.

24 comments

Good reminder that the basics and the essentials still apply. Nothing has changed on our end and it's likely nothing will. I also share your optimism about the future president and I think it's amazing to see how other people are also feeling so euphoric about it. When I saw video of people crying and cheering in the streets, it was like the whole country had just won the World Series only everyone was sober and orderly.

Heh, “like the whole country had won the world series” is a great description of the images I saw on tv. FWIW, there was a fair amount of dancing up here too (and TO has actually won the series more recently than some of the yank teams!).

I wish more of your fellow bloggahs accepted the interrelated thing, brip blap.

A lot of my friends have gotten swept up with the moment, with both good and bad reactions, and have started to alter their habits. Either thinking that everything is fixed now or thinking that we need to pull out before it all goes down the drain. I've been trying to tell them that the basics don't change at all but they are wrapped up in the rhetoric and don't see it.

i both agree and disagree – the fundamentals of success haven't changed, and you summed them up so well here. But as I've said on other blogs and also on my own, that while the things we need to do as individuals hasn't changed, our environment has. And when your environment conspires against you, or supports you, your actions can have different results. But now I think there is a sense that anything is possible, and these things that seemed so “hard” (ie, spending less than you earn) don't seem so hard anymore.

There is a lot more dependence place on people today's about their future and educational needs. In some aspects that hurts, and the fact that one salary most likely can't support a family anymore. But I agree that people tend to try to live outside of their means and with increased technology, it becomes harder. People just need to take responsibility for themselves more.

It has been an interesting year. Over a million jobs lost, yet I've acquired a new job with a substantial pay raise, and just got promoted from that job. My wife started her first job in a new career field after a long midlife career change process. Despite the macro environment, everyone's circumstance is unique, and opportunity is still there, if a little more difficult to identify. Despite anything that might happen in politics, the US remains the land of hope and opportunity.

Earn more than you spend, yes 🙂 At the same time, it never hurts to avoid spending more than you earn. And you're exactly right – people who are in “the right place” career/industry/lifestyle-wise, even in bad times, will always do well.

You're so right and of course, it doesn't matter who is in government, for how long, what the economy looks like or whatever else happens, you are in control of your own destiny. Many points like you made above are valid at any time and at any stage of your life.

At last, soothing voice in this environment of gloom and doom. The principles remain the same. The environment may have changed, as it always will. But the principles will remain.

Cheers

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